IN THE MATTER OF THE MARY R. LATIMER TRUST U/A/D 12/3/1924
Submitted Date July 11, 2013
Decided Date August 2, 2013
Norris P. Wright, GORDON, FOURNARIS & MAMMARELLA, P.A., Wilmington, Delaware; Attorney for Petitioner Wilmington and Brandywine Cemetery.
Harold W.T. Purnell, II, ARCHER & GREINER, P.C., Georgetown, Delaware; Attorney for Petitioner PNC Bank, N.A.
The Wilmington and Brandywine Cemetery (the "Cemetery") and PNC Bank, N.A. (the "Trustee") petitioned to modify a trust established for the maintenance of two burial lots (the "Trust"). Contending that the Trust has a charitable purpose, they relied on the common law doctrine of cy pres, Delaware's statutory codification of the cy pres doctrine, and the common law doctrine of deviation. The petition is denied.
I. FACTUAL BACKGROUND
Mary R. Latimer (the "Settlor") established the Trust pursuant to an agreement dated December 3, 1924, among the Settlor and the predecessors to the current Trustee (the "Trust Agreement" or "TA"). The Settlor funded the Trust with $5, 000 to be used only for the "uses, intents, purposes and trusts" set forth in the Trust Agreement. TA at 1.
The Trust Agreement provides that the corpus will be held in trust and invested "in some safe and productive securities, with power from time to time, in [the Trustee's] discretion to call in and reinvest the same, as may be necessary." TA at 1. The Trustee is authorized to deduct from the gross income "the costs, taxes and expenses of conducting the trust, including a reasonable compensation for their services as such trustee, not to exceed five per cent (5%) of the gross income arising from the said trust fund." Id. The Trust Agreement directs the Trustee
to apply the net income, so far as may be necessary, for the perpetual care and renewal when necessary of the vaults and monuments, the iron fence railing and steps upon and around lots known as #29 and #30, Section 13 in the Wilmington and Brandywine Cemetery, in the City of Wilmington, Delaware, covered by certificate #221, now standing in the name of Henry Latimer, and including in particular when necessary the renewal of the said iron fence and railing from time to time when and as the same shall disintegrate and in the judgment of the said trustees require replacement.
Id. To the extent there is excess income, the Trust Agreement directs the Trustee
to permit whatever excess of income shall remain from year to year over and above the amount required to carry out the purposes hereinbefore expressed in this trust to accumulate, so as to provide for the renewal and replacement, as shall be required in the coming years, of the vaults, monuments, iron fence railing, and to provide further for the defence [sic], if needful against any attempt to condemn the property for any purpose whatsoever and to remove the bodies from this lot to another location.
Id. at 1-2.
The Trust Agreement thus calls for the Trust's net income to be used to maintain lots #29 and #30 (the "Burial Lots") and their immediate surroundings in the Cemetery. The Trust Agreement instructs that excess net income shall "accumulate" to be used (i) "for the renewal and replacement . . . of the vaults, monuments, [and] iron fence railing, " (ii) "for the defence [sic], if needful, against any attempt to condemn the property for any purpose whatsoever, " and (iii) if that defense is unsuccessful, "to remove the bodies" from the Burial Lots "to another location."
The Cemetery has operated in Wilmington, Delaware since 1848. It houses more than 22, 000 interments, including noted Delawareans such as Delaware's first governor, Dr. John McKinley, and philanthropist and chemist Harry Fletcher Brown. The Cemetery boasts stands of Flowering Dogwood, Sassafras, Northern White Cedar, and Sweetgum trees believed to be the largest in Delaware.
The Cemetery currently operates at an annual deficit. Because of its endowment, the Cemetery is not presently in financial danger, but it could face difficulties in a decade or so. Acting with prudent foresight, the Cemetery's board of directors has sought to address the annual deficit. As part of that process, the Cemetery identified the Trust as a potential source of funds. Through the petition, the Cemetery asks the Court to modify the Trust "to direct that three percent (3%) of the net asset value of the Trust be distributed annually to [the] Cemetery for the purposes stated in the Trust as well as for the general maintenance of [the] Cemetery." Petition ¶ 29. The Trust's value in February 2013 was approximately $500, 000. Taking three percent from the Trust would yield approximately $15, 000 annually for the Cemetery. This amount would go a long way towards addressing the annual deficit.
The Cemetery contends that the modification is appropriate because the Trust's income is "well in excess" of what is needed to maintain the Burial Lots. Id. ¶ 20. In the last ten years, the Trustee disbursed $13, 070.50 on one occasion to maintain the Burial Lots and their surrounding features. The Cemetery represents that it would cost $10, 000 to remove and relocate the remains in the Burial Lots should the need arise. As further support for the modification, the Cemetery argues that the iron railing and areas surrounding the Burial Lots are actually not located on the Burial Lots but on land belonging to the Cemetery.
Historically, the Cemetery has not allocated any maintenance expense to the Trust, claiming that it is "difficult to determine just what amount of the overall maintenance costs for the Cemetery should be allocated." Dkt. 1 at 1. The Cemetery did not identify any methods that have been tried. A relatively obvious and straightforward approach would be to allocate to the Trust its pro rata share of maintenance and grounds-keeping expenses calculated using a reasonable ratio, such as the ratio of the Trust's two interments to the total number of interments (2/22, 000), the ratio of the land area covered by the Burial Lots and their surrounding features to the total land area of the Cemetery, or the ratio of certificates held by the trust (one) to total certificates issued by the Cemetery. Doubtless minds more familiar with the details of the situation could devise other reasonable methods. I suspect none of these methods would result in an allocation approaching a unitrust deduction of 3% of the Trust's net asset value per year.
In essence, the petition asks the Court to deploy its supervisory powers over trusts as an equitable Robin Hood. If the modification is approved, a Trust that the Settlor funded to maintain two burial lots will end up subsidizing a cemetery with 22, 000 interments.
II. LEGAL ANALYSIS
The petition seeks to modify the Trust pursuant to common law cy pres, statutory cy pres, and the common law doctrine of ...